Anya Kamenetz Generation Debt

I'm a 26-year-old freelance writer. In April 2004, when I was 23, I was assigned an article for the Village Voice as part of a series titled "Generation Debt: The New Economics of Being Young."

That summer, I sold a book on the same concept. So for the past three years, which happens to be my whole career, I've covered the economic challenges affecting Americans under 35. I blog about them, write articles about them, talk about them on TV and the radio, and visit college campuses to talk with students about them.

Just as important as diagnosing the problem, my job is figuring out how people our age can encounter and overcome these challenges. Maybe it's just because I'm a journalist, but I often find that the solution boils down to having the right information. So I'll need your help to make sure I'm asking and answering the right questions.

No Select Membership

First, I'll discuss what it means to be part of Generation Debt. See if any of this sounds familiar: You worked 20 hours a week while attending a public college, did internships and worked full time in the summer, and graduated after five or six years with five figures of student loans.

You have four figures of stubborn credit card debt, too, and your savings are miniscule. You moved to a big city with rents you could barely afford to find more job opportunities -- and you did, but those jobs were often short-term, freelance, or contract positions, without benefits or a truly livable wage.

Sometimes you spend too much of your hard-earned cash on stuff like electronics, vacations, concert tickets, and eating out, because you're only young once and you deserve to have fun. You may have changed careers a couple of times or headed back to graduate school (meaning more debt) to try to improve your prospects; you may have moved back in with your parents to save money. And a small but very important contingent of you even served (or are still serving) in Iraq and Afghanistan; these veterans often say they enlisted to pay for their education.

You're putting off marriage, starting a family, and buying a house. You're wondering when, exactly, you're going to feel settled, like a grownup. I know I do.

The Big Picture

To turn to the big picture for a second: Generation Debt means larger-than-ever-before levels of student loan debt (two-thirds of undergraduates now borrow an average of $19,300) and credit card debt (91 percent of final-year students have a card with an average balance of $2,864).

About half of us don't have any college experience, while less than a third end up with a four-year degree at a time when a B.A. seems like the minimum requirement for earning a middle-class income. (How to succeed without a degree is something I'll discuss in a future column). On average, young people from 25 to 34 are spending an amazing 16 percent more than they're earning.

Where the Money Goes

There's no getting around it -- we're the first generation of Americans who have fallen short of what our parents achieved economically by the same age. In fact, at the end of May, a study by the Pew Charitable Trusts and other big think-tanks found men in their 30s earning 12 percent less on average than men of their fathers' generation.

Wealth has also been redistributed from younger to older across generations. Recently, USA Today ran a front-page analysis of federal data showing that nearly all wealth created in the United States since 1989 has gone to households headed by people over 55, which have doubled in wealth. Meanwhile, households headed by younger folks have fallen behind or barely kept even with inflation.

Footing the Bill

I hate to say it, but being in Generation Debt isn't necessarily something we're going to grow out of. In just 10 years, this cohort (a fancy name for people who remember the same Top 40 songs as you) will be the bulk of the workforce. Meanwhile, the aging of the baby boom generation will change our nation's demographics permanently, calling the survival of Social Security and Medicare into question.

Though I don't know exactly how these federal budget dilemmas will be solved (does anyone?), the likely requirement that we pay higher taxes as workers to cover massive national retirement expenses constitutes a kind of generational debt as well, as economist Lawrence Kotlikoff has brilliantly discussed. Our current record national debt of over $8 trillion isn't helping things much.

What We're Not

I should also explain what Generation Debt isn't.

It's not about entitlement, or an unwillingness to pay our dues or struggle like young people always have when starting out. It's not about spending too much money on PlayStation 3, Starbucks, or "This Is Why I'm Hot" ringtones.

It's not about complaints like, "Oh, we have it worse than World War II or the Great Depression!" It's not about whining or blaming our problems on anyone else. It's not a situation that mainly affects rich people, white people, or college-educated people -- in fact, the average young person is none of these.

Stepping Up, Staying Informed

So if we're not whining, complaining, or blaming, what should we be doing? Stepping up. Making changes where we can in our own financial lives, and working for change where it'll help in the public arena.

Individually, your first responsibility is to stay informed. You should know what you owe now on your student loans and other debt, and have a plan to get square. You need to plan for frequent transitions -- from job to job, city to city, school to work and back -- because the unexpected is a constant in our stage of life.

You should also have a savings account and an Individual Retirement Account (IRA). Both will get you in the habit of saving, even if the amount seems pathetic right now. And you should have some short-term and long-term financial goals. This column will discuss how to establish them.

My Personal Finances

Finally, let me put my money where my mouth is for a second. I opened an IRA at 24 and have fully funded it for the past three years. It's in two no-load mutual funds. Aside from that annual contribution, I put 10 percent of each freelancing check I get into a savings account, plus I make four estimated income tax payments annually.

My short-term financial goal is to pay off my two credit cards and all bills in full each month, which I do electronically, and to try to repair my credit score, which got dinged from great to "fair" when I went out of the country last year and missed payments on one card for three months. (Dumb, I know.)

My long-term financial goals are to integrate my finances more fully with my new husband's, track our expenses better, and purchase a home in the next couple of years. I'd also like to stop spending too much money on travel and fancy groceries.

In terms of public policy, I see changes on the horizon in the regulation of debt and creditors for student loans, credit cards, mortgages, and bankruptcy. I'm hoping for changes in our health care system and other workplace issues that affect young people, too. I'll be covering all of these areas in this column as well. So bookmark me or put me in your RSS feed -- you won't regret it.